Digital Economy Reformulation and Economic Competitiveness of Smart Cities: An Application of Soft Systems Methodology

Abstract

Smart cities have become a new trend in urban development worldwide, and digital economy plays a crucial role. Therefore, this study aimed to create a novel formulation of digital economy that contributes to improving competitiveness of smart cities and provides practical guidance on digital economy strategies. A Soft System Methodology (SSM)–based action that utilizes the concept of systems was used to investigate conceptual models from different perspectives, from conceptual thinking to real-world–based action. Moreover, Indonesia was selected as a case study due to its extensive implementation of smart cities over the past five years, with over 250 cities participating in the program. The study successfully identified five scopes of digital economy, namely digital technology, digital service, shared economy and platform, digitalized economy, and financial services. It also identified six crucial criteria of economic competitiveness, namely human resources, product offerings, innovation capability, economic productivity, ease of business and investment, as well as financial capital. In conclusion, local cities and regencies' governments need to accelerate digital economy by creating supporting policies, making collaboration, effective digital marketing, improving digital literacy, guaranteeing cyber security, as well as protecting consumers and data privacy.